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A Contribution to the Public-Private Wage Inequality Debate: The Iconic Case of Romania

Name of the Asset | A Contribution to the Public-Private Wage Inequality Debate: The Iconic Case of Romania
Type of Asset | Working Paper
Date | December 2011

Summary

The global economic crisis sparked a worldwide debate over the need to restructure the public sector, including public wages. In Romania, the public sector still employs about 30 percent of the workforce, and the wage bill is around 20 percent of the current budget expenditures. The purpose of the research is to shed light on the determinants of the public-private wage differential and on the dynamics and decomposition of wage inequality between the private and public sector in 2004 and 2009. This study presents both data and descriptive statistics for Romania, as well as estimates of the public-private wage premium from OLS regressions.

The paper points out two recommendations for policymakers: (a) reduce the public-private wage inequality by cutting/freezing those public wages that offer a better reward for the same characteristics (education, experience) compared to the private sector, and (b) reduce the inequality within the public sector itself. It also suggests a clear framework for performance evaluation, especially for those public services that have no private counterpart, such as public administration, or the military.

Authors:

  • Flaviu Mihaescu, Group of Applied Economics, Bucharest, Romania.
  • Liviu Voinea, Department of International Relations, Academy of Economic Studies, Bucharest, Romania and Group of Applied Economics. Bucharest, Romania.

Country and/or Region | Romania
Name of the Program | Regional Research Competition
Funder(s) | Jubiläumsfonds of the Austrian National Bank (OeNB) and the Austrian Ministry of Finance

 

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